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Internal 
Control System

Internal Control System

To ensure appropriateness, raise transparency, and maintain compliance of its management, the Board of Directors has established the “Basic Policy on Developing the Internal Control System” to develop and operate the internal control system of the Company.

Basic Policy on Developing the Internal Control System

１．System to Ensure that Directors and Employees Execute Their Duties in Compliance with Laws and Regulations and the Articles of Incorporation
  • ・The Company shall establish its mission, vision, values, and culture and ensure that its Directors and employees (hereinafter the “Officers and Employees”) are familiar with them.
  • ・The Company shall appoint a Chief Compliance Officer (CCO) to promote compliance activities in the Company and its subsidiaries (hereinafter the “Group”).
  • ・The Company shall establish the Compliance Rules and Compliance Manual, which apply to the Group as a whole, and shall establish and put into practice a code of conduct to ensure that the Officers and Employees of the Group not only comply with laws and regulations and rules but also conduct their corporate activities while maintaining high ethical standards.
  • ・The Company shall conduct periodic training sessions and ensure that the Officers and Employees of the Group participate in such training sessions to ensure that they acquire correct knowledge of compliance and to help them practice compliance in their daily business activities.
  • ・A Compliance Meeting chaired by the Representative Director shall be held once a quarter to receive reports and discuss matters related to the Group’s compliance.
  • ・An internal reporting contact point for the Group as a whole shall be established in the Company to receive consultation and reports on organizational or individual violations of relevant laws, regulations, notices, the Articles of Incorporation, internal rules, etc., and general social norms, in an effort to detect and correct such violations at an early stage and to strengthen compliance management in the Group.
  • ・The Company shall never have any connection with anti-social forces or groups that threaten the order and safety of civil society and shall take a firm stance against unreasonable demands in cooperation with lawyers, the police, etc.
  • ・An Internal Audit Department shall be established in the Company to conduct internal audits of the effectiveness of the internal control of the Company’s management, efficiency and effectiveness of operations, compliance with laws and regulations, and other matters.
２．System Concerning Retention and Management of Information on the Execution of Duties by Directors
  • ・The Company shall properly retain and manage legal documents such as minutes of the General Meeting of Shareholders, minutes of the Board of Directors meetings, and financial statements, as well as information (including electromagnetic records) related to the execution of important duties, in accordance with the Document Management Rules and other internal rules.
  • ・The information retained and managed shall be accessible at any time upon requests from Directors or Corporate Auditors.
３．Rules and Other Systems Concerning Management of Risk of Loss
  • ・The Company shall accurately identify risks and take actions to minimize the risk by preparing appropriate countermeasures in advance, depending on the size of the risk, the likelihood of its occurrence, and the degree of impact if it occurs.
  • ・With regard to the information security risk, the Chief Information Security Officer (CISO) shall periodically report the status of information security operations to the Representative Director, the Chief Technology Officer (CTO), and others to confirm the effectiveness and adequacy of the information security measures.
  • ・In accordance with the Group Basic Rules for Crisis Management, the Company shall strive to establish and operate a system for responding to crises in preparation for the occurrence of large-scale accidents, disasters, misconduct, etc., and shall take prompt action in accordance with said rules in the event of a crisis to prevent the spread of damage and minimize the amount of damage.
４．System to Ensure Efficient Execution of Duties by Directors
  • ・In addition to the regular monthly meetings of the Board of Directors, extraordinary meetings of the Board of Directors shall be held as necessary to ensure active exchange of opinions and flexible decision-making.
  • ・The Company shall introduce an Executive Officer System to separate the business execution functions from the management decision-making and supervision functions of Directors, thereby accelerating decision-making and clarifying responsibility and authority for business execution.
  • ・The Company shall establish the Regulations of the Board of Directors, Organization Rules, and Rules on Administrative Authority to define the division of duties and authority of the Officers and Employees, and each of them shall execute his or her duties in accordance with these rules.
５．System to Ensure Appropriateness of Operations Within the Corporate Group Comprised by the Company, Parent Company and Subsidiaries
  • ・The Company shall enter into management agreements with each of its subsidiaries (hereinafter the “Group Companies”) and request prompt reporting of important matters that affect the Group.
  • ・The Company shall dispatch its Directors and Corporate Auditors to the Group Companies to attend their Board of Directors Meetings and confirm the status of the execution of duties by the Officers and Employees of the Group Companies.
  • ・The Company and the relevant departments of the Group Companies shall cooperate with each other, share information, and support the business operations of the Group Companies.
  • ・Compliance-related rules (the Rules for Responding to Anti-Social Forces, Internal Reporting Rules, Internal Control Rules, etc.) shall apply to the Group as a whole, and efforts shall be made to establish, maintain, and operate compliance systems at the Group Companies based on these rules that are equivalent to those of the Company.
  • ・The Internal Audit Department of the Company shall directly audit the Group Companies or be given the results of audits conducted by the Group Companies to confirm the validity and effectiveness of such audits.
６．Matters Concerning the Appointment of an Employee/Employees to Assist the Duties of Audit & Supervisory Board members

In the event that Audit & Supervisory Board members request the appointment of employees to assist them in the administration of the Audit & Supervisory Board or in the performance of other duties, the Company shall, upon consultation with the Audit & Supervisory Board members, appoint dedicated or concurrently serving employees to assist the Audit & Supervisory Board members (hereinafter the “Audit & Supervisory Board member Staff”).

７．Matters Concerning Independence of the Employee/Employees Assisting the Duties of Audit & Supervisory Board members from the Board of Directors
  • ・Personnel changes and performance evaluations of the Audit & Supervisory Board member Staff shall be made after listening to and respecting the opinions of the full-time Audit & Supervisory Board members.
  • ・Disciplinary actions of the Audit & Supervisory Board member Staff shall be taken with the consent of the Audit & Supervisory Board.
８．Matters Concerning Ensuring Effectiveness of Instructions from Audit & Supervisory Board members to the Employee/Employees Assisting Audit & Supervisory Board members
  • ・In the event that the Audit & Supervisory Board members give instructions to the Audit & Supervisory Board member Staff in the performance of their duties, the Audit & Supervisory Board member Staff shall follow the instructions of the Audit & Supervisory Board members and shall not be subject to the direction and order of the Directors.
  • ・In the event that the Audit & Supervisory Board member Staff serve concurrently in other positions, the superior of the department in which the Audit & Supervisory Board member Staff serve concurrently and the Directors shall cooperate as requested by the Audit & Supervisory Board members to ensure the smooth performance of duties by the Audit & Supervisory Board member Staff.
９．System for Directors, Accounting Advisors and Employees to Report to Audit & Supervisory Board members, and Other Systems Concerning Reporting to Audit & Supervisory Board members
  • ・Directors shall report to the Audit & Supervisory Board members on the status of the execution of their duties at important meetings such as the Board of Directors meetings on a regular basis and, if necessary, report at any time and without delay.
  • ・When an officer or employee of the Group is requested by a Audit & Supervisory Board member to report on matters concerning the performance of his or her duties, he or she shall do so without delay.
  • ・When an officer or employee of the Group discovers a fact that may cause significant damage to the Company, he or she shall immediately report it to the Audit & Supervisory Board members.
  • ・The Company shall establish an internal reporting contact point that enables the Officers and Employees of the Group to report directly to the Audit & Supervisory Board members and make it known to the Officers and Employees of the Group.
10．System to Ensure that Individuals Reporting to Audit & Supervisory Board members Are Not Treated Unfavorably on the Grounds of Such Reporting

The Company shall stipulate in the Group Internal Reporting Rules, which apply to the Group as a whole, that no retaliatory action shall be taken against a whistleblower who uses the Internal Reporting System to report an incident, and make known the contents of such rules to the Officers and Employees of the Group.

11．Matters Concerning Policies on Procedures for Advanced Payments or Reimbursement of Expenses Incurred in Association with the Execution of Duties by Audit & Supervisory Board members, and on Handling of Other Expenses or Obligations Incurred in Association with Such Execution of Duties

When a Audit & Supervisory Board member requests the payment of expenses for the performance of his or her duties, the Company shall promptly pay such expenses, unless it is proved that the expenses requested are not necessary for the performance of the Audit & Supervisory Board member’s duties.

12．System to Ensure Effective Auditing by Audit & Supervisory Board members
  • ・The Representative Director shall, in principle, exchange opinions with the Audit & Supervisory Board members once a year on management policies, significant risks surrounding the Group and issues to be addressed, and the status of development and operation of internal control systems.
  • ・The Audit & Supervisory Board members shall regularly hold discussions with the Accounting Auditors and the Internal Audit Department to exchange information for effective auditing.
  • ・The Audit & Supervisory Board members may utilize attorneys, certified public accountants, and other external specialists as necessary.
  • ・Full-time Audit & Supervisory Board members shall attend important meetings of the Company, such as the Compliance Meeting, and shall regularly receive reports from the Company’s Chief Compliance Officer (CCO) on the status of the development and operation of the Group’s compliance system.
  • ・The Internal Audit Department shall report the contents of individual internal audit reports and general internal audit reports to the Audit & Supervisory Board.

Summary of Operation of the Internal Control System

Based on the “Basic Policy on Developing the Internal Control System,” the Company strives to establish and operate the system and reports the status of operation at the Board of Directors meeting annually. For the fiscal year ended November 2022, significant defects or deficiencies were confirmed not to exist for matters prescribed in the Basic Policy at the Board of Directors meeting held on January 16, 2023.

１．Execution of Duties by the Directors
  • ・With 6 of the Company’s 10 Directors appointed as External Directors and all 3 of its Audit & Supervisory Board Members appointed as External Audit & Supervisory Board Members, the Company has established a system that enables External Directors and External Audit & Supervisory Board Members to provide beneficial supervision and auditing from a neutral standpoint, thereby strengthening the management oversight function. The appointment of Director candidates is determined by the Board of Directors based on reports from the Nomination and Compensation Committee, which the Company has established voluntarily.
  • ・The Board of Directors held 12 regular meetings and 2 extraordinary meetings, with attendance of Directors and Audit & Supervisory Board Members, to not only resolve and report on individual agenda items in accordance with the authorization criteria, but also deliberate on important management matters (business strategy, capital policy, M&A, human resource strategy, sustainability, etc.). All Directors and all Audit & Supervisory Board Members attended all the meetings held. In addition, to ensure active exchange of opinions, efforts including the review of Board meeting agenda items, early distribution of Board meeting materials and enhancement of their contents, and improvement of the meeting procedures are being made.
２．Compliance and Risk Management System
  • ・By resolution of the Board of Directors, the Company has appointed an executive officer as CCO (Chief Compliance Officer) responsible for the formulation and execution of compliance plans, holding of Compliance Meetings, implementation of compliance training, and other duties to promote compliance activities.
  • ・Once a quarter, a Compliance Meeting attended by the Executive Directors, Executive Officers, full-time Audit & Supervisory Board Members of the Company, and the Representative Directors of each Group company is held to share and discuss the Group’s compliance-related matters. The matters reported and discussed at the Compliance Meeting are then reported to the Board of Directors.
  • ・Compliance-related rules (Compliance Regulations, Insider Trading Prevention Regulations, Internal Reporting Regulations, Regulations for Responding to Anti-Social Forces, Internal Control Regulations, Intellectual Property Rights Management Regulations, Basic Regulations for Crisis Management, Basic Regulations on Prevention of Bribery, etc.) have been established for the Group as a whole. The Group strives to ensure effective internal control by informing all Group officers and employees of these compliance-related rules and operating in accordance with those rules.
  • ・The Group provides all officers and employees with compliance training (new hire training, training on the “Money Forward Group Compliance Manual,” training on insider trading, training on harassment, and training on intellectual property) to raise awareness of compliance among all its officers and employees.
  • ・An Internal Reporting System has been established to enable all officers and employees of the Group to directly report acts by the Company and Group companies that violate or are likely to violate compliance to the designated department of the Company, and all Group officers and employees have been informed of this System to ensure early identification of, and prompt and appropriate countermeasures for, compliance issues including the violation of laws and regulations.
  • ・With respect to information security, which is the most significant risk for the Company, the CISO (Chief Information Security Officer) reports monthly on the status of security operations to the CEO and CTO (Chief Technology Officer), including an evaluation of the appropriateness and effectiveness of those operations along with comments. In addition, quarterly reports are provided to the Board of Directors.
３．Internal Audits
  • ・The internal audit departments of the Company and Group companies perform internal audits of their respective companies to verify the status of business operation, confirm the status of compliance with laws and regulations, and prevent acts in violation of laws and regulations. Results of these internal audits are reported to the Company’s Representative Director and Audit & Supervisory Board in a timely manner, and results are also reported at meetings of the Board of Directors.
  • ・By participating in monthly meetings in which the CISO reports on the status of security operations to top management and by reviewing the minutes of such meetings, the internal audit department of the Company evaluates the activities of those meetings and reports to the Audit & Supervisory Board as necessary.
４．Execution of Duties by the Audit & Supervisory Board Members
  • ・The Audit & Supervisory Board met 14 times and conducted on-site audits based on the audit plan, and received reports from Directors, employees, or others on a regular basis.
  • ・Audit & Supervisory Board Members audited the execution of duties by Directors and worked to strengthen and raise the level of their own audit function by attending the 14 meetings held and through the exchange of opinions with the Representative Director on matters including management issues, the status of establishing an environment for Audit & Supervisory Board Member audits, and material audit issues. Full-time Audit & Supervisory Board Members attend Management Meetings (meeting for information sharing and discussion attended by the Representative Director, Executive Directors, Executive Officers, and the Representative Directors of key subsidiaries) to verify the execution of duties by Representative Directors and others.
  • ・Audit & Supervisory Board Members attend the Compliance Meeting and interview the CCO to directly verify matters including the status of legal and regulatory compliance, while also checking on the status of the Group’s internal audits through such means as interviewing the Internal Audit Office. Through these efforts, Audit & Supervisory Board Members have a system in place to audit compliance-related issues at the daily operational level.
  • ・In addition, one employee with appropriate knowledge, skills, and experience has been assigned as an Employee Assisting Audit & Supervisory Board Members (concurrently a member of the Internal Audit Office) to assist the execution of duties by Audit & Supervisory Board Members.

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